Barrick Gold Spins Off African Assets

I love applauding brilliant management moves, especially when they add value to companies which I have been recommending for some time. That is the case with Peter Munk’s Barrick Gold (NYSE:ABX), which announced that it is spinning off its African mines to create African Barrick Gold, to be separately listed on the London Stock Exchange. The assets in question are four mines in Northwest Tanzania which produced 716,000 ounces of gold last year, some 9.6% of Barrick’s total production. In one fell swoop, the move will create the largest listed gold company in London, adding $435 million in cash to Barrick’s balance sheet. Barrick, the world’s largest gold producer, will retain 75% of the new company. The flotation will enable Barrick to monetize the multiple over book value, effectively turning paper into gold. It is a clever move that Munk could well have lifted out of the US Treasury’s playbook. It also builds a firewall between his riskiest assets, those in politically unstable Tanzania, and the more stable parent. Having once stared down the wrong end of a Tanzanian soldier’s AK-47 during a leftist coup d’état in the Seychelles, I can personally vouch for the value of such insurance. Munk clearly believes that the demand for all types of gold backed assets is set to soar, be they gold bullion, ETF’s, coins, or just plain paper. As Peter Munk has forgotten more about gold that I will ever know, I’ll put by money behind him. The bottom line message for you and me: buy more gold for the long term.